Asserting that the dramatic shifts in demographic structure could overwhelm the ability of policies to mitigate the effects of aging on labour force participation, the IMF today underscored the need to rethink migration policies to boost labour supply in developed nations.
In its annual World Economic Outlook, the International Monetary Fund said that there is considerable scope for policies to counteract the forces of aging by enabling those who are willing to work to do so.
Released ahead of the next week's annual spring meeting of the IMF and the World Bank, the report said that investing in education and training, reforming the tax system, and reducing incentives to retire early -- along with stronger policies that improve the job-matching process and help workers combine family and work life - can encourage people to join and remain in the workforce.
"Ultimately, however, the dramatic shifts in demographic structure could overwhelm the ability of policies to mitigate the effects of aging on labour force participation, which underscores the need to rethink migration policies to boost labour supply in advanced economies," the IMF said.
The report found that aging and the drag from the global financial crisis can explain a significant share of the decline in the participation of men during the past decade.
However, the rising participation of women underscores the importance of other factors in shaping participation decisions, the IMF said.
It added that labour market policies and institutions, together with structural changes and gains in educational attainment, account for the bulk of the dramatic increase in the labour force attachment of prime-age women and older workers in the past three decades.
At the same time, technological advances such as automation, while beneficial for the economy as a whole, have weighed moderately on participation rates, it said.
According to IMF, population growth in advanced economies is slowing, life expectancy is rising, and the number of elderly people is soaring. As these trends gather steam, the UN projects that by the middle of this century, total population will be shrinking in almost half of advanced economies.
The burden will fall on those currently considered to be of working age, who in a few decades will support close to double the number of elderly people they do now.
Unless more people participate in labour markets, aging could slow advanced economies' growth and, in many cases, undermine the sustainability of their social security systems, it added.
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